Let Paradis Appraisal Services help you discover if you can eliminate your PMIWhen buying a house, a 20% down payment is typically the standard. The lender's risk is usually only the remainder between the home value and the amount outstanding on the loan, so the 20% supplies a nice buffer against the charges of foreclosure, selling the home again, and typical value variations in the event a borrower is unable to pay.During the recent mortgage boom of the mid 2000s, it was widespread to see lenders reducing down payments to 10, 5, 3 or often 0 percent. How does a lender handle the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This added plan guards the lender in case a borrower doesn't pay on the loan and the value of the home is lower than the loan balance. Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and on many occasions isn't even tax deductible, PMI is pricey to a borrower. Unlike a piggyback loan where the lender takes in all the losses, PMI is lucrative for the lender because they secure the money, and they get paid if the borrower is unable to pay.
How can homeowners keep from paying PMI?The Homeowners Protection Act of 1998 requires the lenders on the majority of loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law guarantees that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches just 80 percent. So, acute homeowners can get off the hook ahead of time.It can take a significant number of years to reach the point where the principal is only 80% of the initial amount of the loan, so it's essential to know how your Illinois home has increased in value. After all, any appreciation you've achieved over time counts towards abolishing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% mark? Your neighborhood may not follow national trends and/or your home may have secured equity before the economy simmered down. So even when nationwide trends predict declining home values, you should realize that real estate is local. A certified, Illinois licensed real estate appraiser can help homeowners figure out just when their home's equity rises above the 20% point, as it's a hard thing to know. It's an appraiser's job to know the market dynamics of their area. At Paradis Appraisal Services, we know when property values have risen or declined. We're masters at recognizing value trends in Glen Ellyn, Dupage County, and surrounding areas. Faced with information from an appraiser, the mortgage company will often remove the PMI with little trouble. At which time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year
|
||||||||||||||||||
